While college students are feeling the stress of studying, writing papers, taking exams, working on projects, living on Ramen Noodles, and trying to have a social life in the midst of all of this, they often try to not think about the amount of debt they’re racking up through student loans. Well, what they probably don’t know is that their school may be making deals with financial companies that are increasing their debt even more.
Many colleges offer students payment cards that they can use much like a debit card. However, according to a Bloomberg Businessweek article, around 900 colleges offering these cards have made deals with financial companies that allow both parties to profit by charging students costly fees for having and using these cards. Some of the fees include swipe fees for each use, replacement fees, overdrawn fees, fees for not using the account for a certain amount of time, a fee to use a personal identification number rather than a signature when paying for something, fees for not supplying certain paperwork, and some cards even charge a fee when students access their financial aid money.
The article includes a quote from a college student stating that his school marketed their payment cards as a "faster, cheaper way for the college to get students their money." So, while colleges are claiming to just be saving money, they actually appear to taking advantage of students and using these cards to make a profit by charging an exorbitant amount of fees. Some of the fees are made known to the students, but some are not. Also, while some of these fees are legal, some appear to be in violation of federal law.
According to the article, these deals took off as a result of the recession, causing state higher education budgets to be cut. Financial companies approached the struggling colleges and universities, offering deals in which the company would pay the costs associated with student aid funds and handle the process of getting the funds to the students. In addition, many of these financial companies would pay the school to let them do this, according to the article. This means students may be getting ripped off while their schools and the financial companies are raking in millions.
Approximately 9 million students are attending colleges and universities that have been found to be making these kinds of deals with financial companies, according to Businessweek. Also, student debt, now totalling more than $1 trillion, has become the nation’s largest source of unsecured debt. These high-fee-charging payment cards are only adding to the problem.
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